MW Two airline stocks are favored by Citi for the short haul, but Delta might be a lower-risk play
By Philip van Doorn
Citi analyst John Godyn considers all of the airlines he covers to be high-risk investments, except for one.
John Godyn of Citi Research sees near-term catalysts for shares of United Airlines and American Airlines.
Airline stocks are priced cheaply relative to carriers' expected earnings power. This isn't unusual, in light of the industry's combination of challenges. But there is no denying the importance of airlines or the growing demand for their services.
As a group, airline stocks in the S&P 500 SPX trade at a forward price/earnings ratio of 9. The forward P/E for the group has ranged from 5.2 to 10.5 over the past three years, with an average valuation of 7.9. These are prices divided by rolling consensus 12-month earnings-per-share estimates among analysts at brokerage and research firms polled by FactSet, weighted by market capitalization.
The full S&P 500 trades at a forward P/E of 22.1, with the valuation ranging from 17.3 to 20.7 over the past three years, for an average of 20.7, according to FactSet.
So airline stocks are inexpensive, reflecting some investors' reluctance to hold shares of companies that face risks from events they cannot control, including volatile fuel costs, weather, the epic disruption of the COVID-19 pandemic and a heavy regulatory burden. Add in the Federal Aviation Administration's chronic shortage of air-traffic controllers, and there is a set of challenges for airline-management teams.
Then again, the domestic industry had a good 2025. Combined profits for the seven largest U.S. carriers by market capitalization rose more than 12% in 2025 to $8.8 billion, their highest 2019, when the group earned $13.4 billion, before posting combined net losses of $34.1 billion in 2020.
In a report on Tuesday, Citi Research analyst John Godyn wrote that he and colleagues were "tactically bullish [on] airlines," led by United Airlines Holdings $(UAL)$ and American Airlines Group $(AAL)$ "at present levels."
Godyn also upgraded JetBlue Airways' $(JBLU)$ stock to a neutral rating from a sell rating, citing a positive view of U.S. carriers' near-term prospects and noting there are so few airlines "for which considering strategic optionality is even a possibility." In other words, he believes JetBlue is ripe to merge with or be acquired by a competitor.
In addition to buy, sell or neutral ratings, Godyn has the option of assigning risk ratings to the stocks he covers. Here's a summary of his ratings on the seven airlines, with them listed in alphabetical order:
Company Citi Research rating Citi Research optional risk rating Market Cap ($mil)
Alaska Air Group Inc. Buy High Risk $6,106
American Airlines Group Inc. Buy High Risk $9,037
Delta Air Lines Inc. Buy - $45,107
JetBlue Airways Corp. Neutral High Risk $1,917
SkyWest Inc. Neutral High Risk $4,027
Southwest Airlines Co. Neutral High Risk $25,672
United Airlines Holdings Inc. Buy High Risk $34,753
Sources: Citi Research, FactSet
Godyn opened a "positive Catalyst Watch" on United and American on Tuesday, which means he believes these two stocks are "most likely to bounce" over the next 90 days. Both companies provided investors with "among the most conservative" guidance for their 2026 operating performance during the most recent round of industry earnings reports, the analyst noted.
For both United and American, Godyn cited competition for market share in Chicago as an important factor in the conservative guidance. He said the lowering of expectations sets both airlines up to provide more upbeat projections during industry conferences in February and March to confirm that the market-share competition wasn't as bad as previously feared.
So Godyn favors United and American over the short term because of catalysts he expects during the first quarter. What about the longer term?
Delta Air Lines $(DAL)$ is the only stock among the seven airlines for which Godyn hasn't assigned a "High Risk" rating. He rates the stock a buy because the company "has consistently executed the strategy that we believe characterizes the 'Super-Majors' today."
While explaining that Citi Research's quantitative models would indicate a high level of risk for Delta's stock, Godyn wrote that he didn't assign the "High Risk" rating because of "other qualitative factors such as demonstrated margin durability, credit risk, and liquidity profile vs. peers."
Estimates for the airlines
FactSet compiles estimated gross profits per available seat kilometer (ASK), based on analysts' estimates, to show how efficiently the airlines are expected to operate their passenger transportation businesses. These are available for six of the seven airlines, with the exception of SkyWest.
Leaving the airlines in the same order, here are estimated gross profits per ASK for 2026 and 2027, along with forward P/E ratios, 2025 earnings per share and consensus EPS estimates for 2026 and 2027. You might need to scroll the table or flip your screen to landscape to see all of the data.
Company 2026 est. gross profit per ASK 2027 est. gross profit per ASK Forward P/E 2025 EPS Est. 2026 EPS Est. 2027 EPS
Alaska Air Group Inc. $0.69 $0.90 9.6 $0.83 $5.43 $8.44
American Airlines Group Inc. $0.59 $0.67 6.6 $0.17 $2.09 $2.70
Delta Air Lines Inc. $1.73 $1.82 9.7 $7.66 $7.20 $8.35
JetBlue Airways Corp. $0.02 $0.24 N/A -$1.66 -$0.98 -$0.35
SkyWest Inc. N/A N/A 8.9 $10.35 $11.43 $12.28
Southwest Airlines Co. $0.85 $0.98 12.5 $0.79 $3.98 $4.82
United Airlines Holdings Inc. $1.02 $1.07 8.2 $10.21 $13.37 $15.26
Source: FactSet
Click on the tickers for more about each company, including news coverage, financials, estimates, charts and consensus price targets.
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February 03, 2026 12:39 ET (17:39 GMT)
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